Few foreign investors were willing to join the NAFMII agreement, Lai said. As a result, they were not able to effectively cover their risks. The ISDA agreement is more familiar to them and will accept and accelerate their accession to China. ISDA, based in New York, is the author of a frequently used master service contract, which is used internationally for over-the-counter derivatives transactions. It dictates the timetables, confirmations, definitions and credit support systems that have been agreed between the two parties and apply to all transactions between them. Some major North American and European banks introduced the 2002 agreement as their agreement of choice with new counterparties. However, when a counterparty insists on negotiating a 1992 agreement, it will generally accept. Foreign investors can choose to sign the ISDA executive contract or local master`s agreements proposed by the National Association of Financial Investors and the Securities Association of China, according to a February 14 report by the People`s Bank of China and four other government agencies. In particular, the Central Bank has been looking for ways to smooth ties between Shanghai and global financial markets.
(Yicai Global) February 24 — By allowing foreign investors to use the International Swaps and Derivatives Association`s master agreement, Chinese financial institutions will move closer to their global counterparts, Chang Geng Lai, managing director of BNP Paribas China, told Yicai Global. In the meantime, the updated clearing memorandum builds on an earlier publication in 2014 and provides more detailed information on the bankruptcy procedures of Chinese commercial banks, investment firms and insurance companies. It also contains an updated discussion on the changes that should be made to the ISDA framework agreement when “automatic early termination” is declared as alleged for a Chinese counterparty, so that all transactions under the agreement are automatically terminated in the event of a bankruptcy application for that counterparty. In addition to a collateral memo we published in 2016, this goes a long way to helping companies get an idea of the state of the situation and the problems they need to take into account in trade with Chinese companies subject to the Bankruptcy Act. By organizing seminars on the 2002 agreement around the world. Three other provisions that have generated support and resistance are the revised definition of the specified transaction, which includes non-derivatives such as deposits and securities lending; The inclusion of the refusal in the late payment infringement event; and the aggregation language in the default cross-determination (point 5 a) (vi)) for threshold purposes. Some counterparties have avoided using the 2002 agreement to avoid disrupting their existing AN links to support ISDA loans, although there is assistance here through the terms of modification of ISDA`s credit support annexes under English and New York legislation. At the time, ISDA believed that the 2002 agreement would be quickly taken over by institutions in North America for new counterparties, but that progress in Europe and Asia would be slower.